The Business Litigation Blog

Department of Justice Blames Apple for E-books Price Fixing

Thursday, May 30, 2013

A federal judge expressed her opinion that the Department of
Justice will in fact prove that Apple orchestrated a price-fixing
scheme with the publishers. It is uncommon for judges to speculate
as to the outcome of a case prior to trial (the trial doesn’t begin
until June 3). However, according to Thomson Reuters, the comments
could put pressure on Apple to settle before heading to trial.

Despite these comments, U.S. District Judge Denise Cote, who
oversaw pretrial hearings, noted that nothing is final until the
trial takes place.

Some background:

Last year, the Department of Justice filed lawsuits against
Apple, Inc. and five large publishing companies—HarperCollins,
Simon & Schuster, Penguin, Hachette Book Group Inc. and
MacMillian.

Recent filings that were made public show that Apple admitted to
meeting with publishing companies in order to discuss e-book sales.
According to Apple, the publishing companies made independent
decisions as far as choosing to force Amazon to increase e-book
pricing.

According to the Department of Justice, however, the meetings
were intended to create a price fixing scheme. The scheme allegedly
operated as follows:

Apple made agreements with publishing companies to create new
pricing models that forced Amazon to sell their e-books at cost as
opposed to below cost (which Amazon often did to generate
customers).

This forced Amazon to raise their prices, and when the
publishing companies made higher profits, they paid the money
directly to Apple.

The Department stated that they have evidence in the form of
emails, one of which documents correspondence between Steve Jobs
and Rupert Murdoch, the chief of HarperCollins whose reputation
precedes him these days. In these e-mails, Jobs allegedly writes to
Murdoch, “throw in with Apple and see if we can all make a go of
this to create a real mainstream e-books market at $12.99 and
$14.99."

While all five publishing companies have settled since the
Department of Justice initially filed, Apple denies the accusations
of price fixing and instead claims to have had a positive effect on
the e-book market with its introduction of the iBookstore.
According to a spokesman for Apple, the company looks forward to
defending themselves in court on the matter.

Price fixing is a common example of an antitrust law that is
broken in the business world. While antitrust laws with regard to
unfair competition can be complex and varying, it is important to
consult an attorney if you have questions. To learn more about the
services we offer, visit pattersonlawfirm.com or call
312.223.1699 to speak with one of our experienced attorneys.

This entry was written by Rose Gregory,
posted on Thursday, May 30, 2013
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